Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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<p>As a part of our Long-term leaders vertical, we look at Enn Energy (ENN) which has had a tumultuous few months and still remains 23% below its Aug-14 high. We believe the long-term prospects for the sector remain strong, while the stock has priced in quite a few of the short-term negatives. We would be inclined to add to our positions here, given:</p><ul><li>Falling oil prices  have led to lower volume growth assumptions owing to the sliding competitiveness of natural gas vs other fuels...</li><li>...However, ENN's valuations now appear reasonable vs historic levels since over the past few months the stock has not only suffered from EPS cuts but also multiple de-rating </li><li>In addition, volume growth forecast for ENN still remains the best amongst peers. C/I make up the bulk of its customers for gas sales and they remain the most price sensitive</li><li>With NDRC recently undertaking the first cut in natural gas prices since the past 15 years, a recent change in stance, this will go a long way to revive volume growth and it portends towards more price rationalization to come which should revive volume growth</li><li>The longer term sector growth is likely to remain strong with the government intent on raising  the share of natural gas in the energy mix to 10% by 2020 from the current 5%</li><li>In addition, changing regional dynamics (Russia delivering gas to China, Japan switching on Nuclear plants) augur well for incremental supply of gas to China</li></ul>

As a part of our Long-term leaders vertical, we look at Enn Energy (ENN) which has had a tumultuous few months and still remains 23% below its Aug-14 high. We believe the long-term prospects for the sector remain strong, while the stock has priced in quite a few of the short-term negatives. We would be inclined to add to our positions here, given:Falling oil prices  have led to lower volume growth assumptions owing to the sliding competitiveness of natural gas vs other fuels......However, ENN's valuations now appear reasonable vs historic levels since over the past few months the stock has not only suffered from EPS cuts but also multiple de-rating In addition, volume growth forecast for ENN still remains the best amongst peers. C/I make up the bulk of its customers for gas sales and they remain the most price sensitiveWith NDRC recently undertaking the first cut in natural gas prices since the past 15 years, a recent change in stance, this will go a long way to revive volume growth and it portends towards more price rationalization to come which should revive volume growthThe longer term sector growth is likely to remain strong with the government intent on raising  the share of natural gas in the energy mix to 10% by 2020 from the current 5%In addition, changing regional dynamics (Russia delivering gas to China, Japan switching on Nuclear plants) augur well for incremental supply of gas to China

ENN Energy (2688 HK) - Measures to rationalize natural gas price will lead to volume growth revival

China

ENN Energy Holdings Ltd. distributes natural gas in China.  The Company, through its subsidiaries, invests in, operates, and manages gas pipelines, and sells and distributes piped and bottled gas in China.

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ENN Energy (2688 HK) - Measures to rationalize natural gas price will lead to volume growth revival

As a part of our Long-term leaders vertical, we look at Enn Energy (ENN) which has had a tumultuous few months and still remains 23% below its...

Sumeet Singh